Apprenticeships: It is time for reform

For the past 18 months, the spotlight has been firmly on Brexit, with conversations and headlines dominated by a deal or no deal. In the same 18 months, the Apprenticeship Levy has been introduced for all businesses with an annual pay bill of over £3 million, reflecting, arguably, the biggest overhaul of the apprenticeship system in a generation. To say that the impact of those two initiatives has been significant for the hospitality industry, would be an understatement.

While the Apprenticeship Levy has brought about a number of benefits – such as a greater focus on apprenticeships in general and an increase in the up-take of higher-level management apprenticeships – there are some fundamental challenges which need to be addressed.

In the days before the Apprenticeship Levy was introduced, SMEs were, by and large, the employers of the majority of England’s apprentices. Yet, since the levy came into play, apprentice numbers in SMEs have fallen off a cliff because they cannot afford the 10 per cent contribution that they currently have to pay towards the training. However, there is good news on the horizon following the Chancellor’s 2018 budget announcement that apprenticeship fees will be halved for small businesses.

Under the new policy, the cost of apprenticeships for non-levy paying employers will be five percent, with the government contributing the remaining 95 per cent. That means, for example, that the cost to an independent restaurant of training a commis chef reduces from £900 to £450, and for a team leader from £450 to £225.

When you consider that there is £1.28 billion pot of unspent levy, and the number of new apprenticeships in the UK fell 28 per cent to 341,700 in the year to June, it is clear to see that those vital changes to the system are needed.

In the current economic climate, any additional costs to businesses are tough, but the value that a hospitality establishment can get from well-trained employees delivers in so many ways – reduced staff turnover, increased productivity, less waste and improved job efficiency. At HIT Training, we hope that the reduced costs will mean many SMEs, in the hospitality industry, will come back to apprenticeships as an effective and beneficial way to train their staff and improve their businesses.

Currently, levy paying employers can transfer 10 per cent of their levy pot to SMEs or charities in their supply chain or sector – but this is something which is relatively unknown, and an opportunity largely underutilised. Furthermore, 10 per cent does not go far enough. It is with all that in mind, that Phillip Hammond’s new plans to increase the amount available for businesses to transfer to 25 per cent, have been welcomed.

That is a move which can only be seen as a positive. Not only has it put the transfer of funds firmly on businesses radar but raising the value will help to improve work-based training, provide increased career opportunities and build transferrable skills which will, ultimately, help the wider UK economy.

Currently for SMEs, the cost of apprenticeships is proving prohibitive and, as a result, hospitality businesses are being forced to limit their training investment to focus just on the skills needed in their business today, rather than considering both what is needed now and in the future. For restaurants, which are working to increasingly tight budgets, this has the potential to dramatically affect the future of the sector as a whole, as employees will not have the skills to innovate and adapt to changing consumer demands and expectations. Ultimately, that will see employees losing their enthusiasm and leaving the industry. For the hospitality sector, which is tackling a chronic skills shortage, the situation is only going to get worse once the UK leaves the European Union hence it is essential that businesses which are not using their levy, or are not able to, look to transfer it to those in the sector who can.

Ofqual’s latest research revealed that 91 per cent of employers value vocational and technical qualifications such as apprenticeships – and yet only 8 per cent of Apprenticeship Levy funds have been used. Furthermore, the survey also showed that eight in ten employers think qualifications like apprenticeships equip learners with relevant skills, while 78 per cent consider them essential when recruiting for skilled and supervisory roles. It strikes me that if we are all agreed that vocational training is vital, then we need to make sure this dedicated funding is unlocked, maximised and shared to help protect our vibrant sector now and in the future by creating positions for the younger generation. If we know that there is a pot of funding available in the sector that can only be used to train and upskill employees, then we would be foolish not to use this and to use it well.